Falklands Assembly Member speaks against pension increases
Written for the November 18, 2022 issue of Penguin News. Printed under the headline “MLA claims pension rise is unaffordable”.
Retirement pension payments likely won’t be increasing beyond the regular inflation adjustment, MLA Roger Spink has confirmed.
He spoke to Penguin News following a public meeting on the pension fund actuarial review, which took place on November 15.
It has also been clarified that the retirement pension fund is not seen as intended to be a single income - and “it has always been thought of that they should be making provision for their own retirement.”
On whether he expects pension payments to go up across the board to support lower-income retirees MLA Spink said, “the policy has been that pension rises go up with inflation, and obviously these things have been decided each year, but that’s been the policy for quite some while.”
It was said in both the public meeting on November 15, and by MLA Spink in the interview, that where pension payments increase so do contributions, which can lead to what was referred to as “intergenerational transfer” - where people in the workforce are adversely affected by the level of payments a pension fund requires, affecting long term sustainability of that fund.
MLA Spink noted also that government contributions into the fund, the most recent of which was a £5m payment in 2019 into the RPF, would have to increase.
Asked what work was underway to support lower income pensioners who could be currently struggling, MLA Spink said “there is another piece of work that’s being done to work out what is a living amount for someone in retirement,” which he emphasised would be different to a living wage.
It is intended for this work to be completed in time for the next budget select committee, MLA Spink added, and afterwards work could be done to assist pensioners on a low income. One suggestion he noted was a pension credit scheme similar to that in the UK, where pensioners on a low income can be given extra funds to help with living costs.
On this MLA Spink said “the pension scheme here, and in the UK, has never been a scheme that is meant to be the only thing people survive off of in retirement.
“It has always been thought of that they should be making provision for their own retirement, that’s why we have the FIPS scheme - which everybody in FIG, people in the private sector, and even self-employed people can contribute into.”
MLA Spink said individuals are encouraged to contribute to the FIPS scheme, as “that’s the top-up to what would be a living amount of money in your retirement.”
He added that “it’s up to people to make their own provisions. Some people in self-employment may well own their own business and sell their own business and live off that. [FIPS] is there to make sure that most people are able to retire in a reasonable amount of comfort.”
He caveated that “there will always be some people who haven’t made provision for their retirement, and that’s where we need to look at having necessary amounts of support.”
MLA Spink cited rental support and single income support as examples of how government can help “to make sure those people are able to live in a certain amount of comfort in their old age.”
On why pensions can’t be increased across the board he said “it’s down to cost, if you provide for people that don’t need it - who have already made provision for themselves - it would probably be unaffordable for the state.”
Actuarial review meeting
MLA Spink noted there was a 4-2 split of MLAs present in favour of increasing the electricity costs to the 39p/unit capacity - and that he himself voted in favour - “but if we’d gone with the people that said let’s not put up the electricity price the support measures would have been different.”
He added that he felt it was of greater benefit to target support to those who need it.
“I wanted to target the support to the most needy because then we’re able to give them more support than we would have been able to by having a blanket subsidy.
“Because if we did that it would cost a lot more money but it wouldn’t be going to the right people, and we would have been restricted as a government in the future in supporting people.”
On whether he expected prices to continue to rise MLA Spink said “I think at the moment we’re planning to cap it, but obviously we don’t know what’s happening to the price of diesel.”
He added that a review is also planned into the cost of new power equipment, depreciation of old equipment, and a number of other factors which impact electricity cost.
“But we’re not in the business of trying to put electricity price up, we’re trying to make it affordable for everybody.”
The Household Power and Fuel Allowance
The public service announcement encouraged eligible households to apply for the newly established temporary Household Power and fuel allowance, which provides an allowance of £140 a month - or £840 over 6 months - between December 1, 2022, and May 31, 2023.
The support is available to households with an annual income up to approximately £43,200 - “with a partial allowance payable to those within a few hundred pounds of the threshold,” the announcement read.
Asked how the value of the support was calculated, MLA Spink explained it is effectively the difference in cost of an average amount of electricity and an average amount of kerosene in an average month for a household.
Penguin News asked MLA Spink how the household income to be eligible for the support was decided. He explained that £43,200 is the median household income - “effectively half of all households,” he added.
He added “there was a feeling it was going to be a lot lower than that,” but that after discussion with the policy makers and MLAs “it was felt they were the level where people would not have the discretionary income to be able to pay for higher increases,” and noted that “drawing lines is always difficult” when deciding on support.
Penguin News was made aware that income from the The Household Power and Fuel Allowance is to be taxed, and asked MLA Spink the reasoning behind this.
“We wanted to bring it in in a hurry and it was easier to bring it in taxed, than to bring in legislation where it was not taxed.
“We grossed it up so that it’s the support plus tax,” MLA Spink added.
A reader raised a query with Penguin News that the policy did work well for non-couple houseshares, or “houses of multiple occupancy” - as there might be residents on a range of incomes who did not precisely split expenses.
MLA Spink said the issue is “a bit of an anomaly” which is being investigated at this time, which has emerged as the policy for support was “rushed out in quite a hurry” to support affected individuals.
The application form for the Household Power and Fuel allowance is available on the social services section of the FIG website, or contact can be made at incomesupport.social@kemh.gov.fk or 27296.